Desperation is influencing the bids of homebuyers in many inventory-tight markets. Both novice buyers and those struggling to trade up to larger spaces are now unnerved by the hyper-competitive seller’s market.
Indeed, some buyers are so determined to beat out rival bidders that they’re tacking gifts onto their offers, says Stacy Berman, a real estate agent who’s sold property for more than two decades.
“People aren’t just going way over list price. They’re also promising sellers lots of tangible incentives. These include season passes to Disneyland and cases of exquisitely fine wine. For sellers with kids, they’re giving away prized video games,” Berman says.
What’s behind the current red-hot seller’s market? Art Godi, who’s headed a family-owned realty firm since 1961, says the historically high demand for larger housing started intensifying last year due to COVID restrictions.
“Suddenly in 2020, your house was no longer just a place to live. It also became an office, a schoolhouse and a restaurant for your family,” says Godi, a past president of the National Association of Realtors (www.nar.realtor).
But even as the yearning for more space has intensified, numerous homeowners have kept their selling plans on hold.
“Lots of would-be sellers are still scared that if buyers come in to see their property, they’ll bring the virus with them,” Godi says.
Predictably, the extreme imbalance between supply and demand has caused prices to ascend dramatically in recent months.
“The trend of accelerating prices that began in June 2020 has now reached its eighth month,” says Craig Lazzara, who tracks housing trends through the widely cited Case-Shiller home price indices.
Multiple bidding wars are now ubiquitous in many areas, and in the wake of a bidding war loss, some wannabe buyers feel so emotionally wounded that they back out of the market indefinitely. But instead, Godi encourages them to regroup and move forward.
“Sit down with your buyer’s agent and a trusted mortgage lender to discuss your options. You may need to be more flexible in terms of your financing or the target area of your search,” he says.
Here are a few other pointers for buyers:
-- Widen the scope of your search by talking to local residents.
Your agent should be helpful in sorting through property listings, making sure you identify the most promising homes available.
But once you have your eye on a particular area, it could be the time to talk to those who know the community best: residents.
“Believe me, most neighbors will bend your ear about their neighborhood. For example, they’ll tell you if they like or hate the local schools and the ages of kids who live in nearby homes,” says Eric Tyson, a personal finance expert and co-author of “Home Buying for Dummies.”
-- Inform yourself on neighborhood property values.
If you’re uneasy about the price tag attached to a property you like, have your real estate agent show you several comparable homes that are also on the market, including those under contract.
Resourceful buyers might even go a step further by asking people who’ve recently bought into the community whether they would mind giving you a peek inside.
“Drop a little note in their mailbox telling them you’re interested in the neighborhood and leave your name and phone number in case they’ll let you come by,” Tyson says.
What’s the advantage of evaluating the price and quality of freshly sold homes? In areas where home prices are rising, the latest sales are the most telling, more so than transactions that occurred months ago.
-- Tour enough properties to make an informed comparison.
Even if the first place you see looks perfect, you’ll want to ponder alternatives to make sure you have a basis of comparison, says Tyson, who recommends that home shoppers look at a minimum of six properties before they buy.
Many sellers are now offering virtual tours, or you can go inside properties with the proper protective gear, including masks and gloves.
“Buyer’s remorse is much less likely if you’ve examined several options -- even if you must do so in a single day,” Tyson says.
-- Contain your emotions before shaping a bid.
Granted, buying a home is now a highly competitive activity in many neighborhoods. But every property should be evaluated on its merits, not on the number of people vying to own it.
Tyson suggests buyers set a ceiling on how much they’re willing to pay for a place before making an opening bid. This is especially important if one partner in a couple is likely to get carried away with a “must have” house they come across.
Jane Fairweather, who sells property through the Long & Foster realty firm, says would-be buyers who’ve lost houses to other bidders are sometimes prone to rush into a deal they might later regret.
“Buying on the rebound without a lot of forethought is not a good idea. Rather, I urge people to recenter themselves until they can create a strategic plan of action to determine their next moves,” Fairweather says.
“Maybe your best decision is to back off from the house-hunting struggle for a short while until you can reassess and decide what truly makes sense for your family,” Fairweather says.
(To contact Ellen James Martin, email her at firstname.lastname@example.org.)